The Agents Earn Their Wings

"The institution of life insurance exists only because it performs a useful and necessary service to the public. Government exists for exactly the same reason. The institution of life insurance is the servant of the public. So is a democratic form of government. The institution of life insurance is the servant of the public. So is a democratic form of government. The institution of life insurance has exercised the highest sense of trusteeship in discharging its obligations in the public. We have the right to expect this same sense of trusteeship from our government."

–Charles J. Zimmerman, CLU

CHARLES J. ZIMMERMAN, general agent for Connecticut Mutual Chicago, was chosen president for the NALU's golden anniversary year. Slender, still a bachelor, already at thirty-seven he had lost most of his hair. He was one of the youngest, and certainly one of the most able men ever elected to that office. Born in New York City on January 9, 1902, Zimmerman received his B.S. from Dartmouth College in 1923. He first became involved in life insurance the following year after taking his M.B.A. at the Amos Tuck School of Business Administration when he accepted the job of executive manager for the New York Life Underwriters Association. Two years later he joined the Connecticut Mutual as an agent in New York City. In 1928 he took over a new branch office in Bridgeport, Connecticut, and on the basis of his excellent management record there was appointed general agent in Newark, New Jersey, in 1931. That same year he received his CLU designation. Forbes magazine named him one of "America's Outstanding Salesmen" in 1935. In 1937 he transferred to Chicago as general agent where her further enhanced his remarkable reputation as a agency builder. An ardent association worker, he had served on numerous committees and filled practically every office in the National Association. At the time he was elected president his was Connecticut Mutual's second largest agency. Composed of twenty-one agents, it produced in excess of $5 million that year.

Few have occupied such a central position in the various branches of the life insurance business as Charles Zimmerman. In the years following his presidency of the National Association, Zimmerman kept up his keen interest in the progress of the organization, rarely missing an annual meeting. He was named a trustee of the American College of Life Underwriters in 1941, and served as Chairman of the Board of 1968 to 1969. During World War II he served in the Navy, rising to the rank of captain and served as coordinator or savings bonds for the Navy, Coast Guard and the Marine Corps. Having married Opal Marie Smith, daughter of an Oklahoma newspaper publisher, immediately after returning to civilian life, Zimmerman joined the Life Insurance Agency Management Association (LIAMA, now the Life Insurance Marketing and Research Association) as director of institutional relations and was elected managing director in 1951. On July 1, 1956, he became president of Connecticut Mutual Life. He retired as chairman of the company Board of Directors in 1968. Always a loyal and active alumnus, Zimmerman was a trustee of Dartmouth for many years and developed a reputation as one of his Alma Mater's most effective fundraisers, as well as a generous benefactor.

"Charlie Zimmerman is a wonderfully personable man," says Holgar Johnson. "He's not contriving at all buy very forthright and honest in all his dealings. He is extremely likeable and makes friends easily. Naturally modest and unassuming, as a business ma, he is very cagy, able and quite. Charlie doesn't pop off; he speaks when he's got something to say, and is an exceptionally good speaker. He was always very active in the educational end of the business. A very dedicated kind of guy, whatever he undertook he did well. He and his wife made a great team. As hosts, they displayed a remarkable talent for entertaining in a way that brought people together making everyone feel welcome and at ease.[i]

Inevitably, someone of Zimmerman's quiet charm and varied experiences developed a wide circle of loyal friends. In spite of himself, he became an incorrigible networker. More than once his habit of bumping into old friends smoothed the way, not only in his career, but in his efforts on behalf of the NALU as well. As chairman of the NALU's Committee on Federal Law and Legislation, he testified before the House Ways and Means Committee when Congress was considering the Revenue Bill of 1942. Like most representatives of the industry, he didn't feel at all the confident about how he would fare on Capitol Hill. But he remembered a fellow alumnus form Dartmouth, and a telephone call opened the necessary door, putting the case for life insurance in a much more favorable light. Recalling the incident, Zimmerman explains:

We were trying to protect the so-called $40,000 exclusion. Traditionally, income in the form of a life insurance payment up to $40,000 was not subject to taxation. The Senate Finance Committee, in an effort to generate more revenue, was trying to eliminate that exemption. The situation was not all encouraging, until I remembered that one of the members of the committee was the father of an old classmate of mine. He arranged for us to meet. When I went to see the congressman, we talked mostly about his son and our years at Dartmouth. Then I mentioned my interest in the upcoming bill. Without the slightest hesitation, he said, "I'll vote to keep the exclusion."[ii]

The years 1939 and 1940 were not kind to the life insurance business. The Institute of Life Insurance should hardly have been founded at a more auspicious time. The entire industry was under the gun and needed favorable publicity more than at any time since the Armstrong investigation. Early in 1939, the industry came under the scrutiny of twelve-member Temporary National Economic Committee (TNEC) which had been appointed by President Roosevelt the previous year. Unlike the Armstrong Committee, which focused on company officials, the TNEC would near from the agents as well. Popularly known as the "Monopoly Committee," it was created by a joint resolution of Congress and charged with looking into "the concentration of economic power in, and financial control over, production and distribution of goods and service." The committee was composed of three senators, three representatives and six administrative officials, representing the departments of the Treasury, Justice, Labor, and Commerce, the Securities and Exchange Commission (SEC) and the Federal Trade Commission. Chairman of the group was Senator Joseph C. O'Mahoney of Wyoming. Executive Secretary of the committee was Leon Henderson of the SEC who let it be known had been the chief cause of the "recession" of 1937. Counsel for the committee was twenty-nine-year-old Gerhard A. Gesell, special counsel, insurance section, Securities and Exchange Commission.

Apparently, the search for a scapegoat to bear the blame for the business recession which had begun in the latter half of 1937 did have a lot to do with the institution of this committee. Discussing the motives behind its creation, Buley says:

Although there were those in the Administration who believed that the program of social economic and political reform had been pretty well accomplished and that the time had come to balance the budget, remove legislative blocks, and go easy on policies which would further antagonize business and destroy the confidence of investors, they were in a minority. Closer to the ear of the President was a well-integrated group of young economists and lawyers, who believed that the economy of the United States had reached a state of maturity, that no longer would private enterprise offer sufficient investment of opportunities for he savings of the people, and that only the government was capable of running the economy. They believed that taxes should be used not primarily for revenue but as a means of economic and social control; that the government, through spending and lending an punitive taxation, could bring business into line and to redistribute the national income.

…Most of them had received their training in law schools or departments of economics dominated by advocates of the new theories; few had any business experience or had earned any money other than by way of university or government payrolls

…Though they differed with each other on details and emphasis, they were in general agreement on the idea that business was to blame for the depression and that big government was a solution to the nation's ills.[iii]

What put the life companies in the hot seat, it seems, was Roosevelt himself who singled out for special study "the tremendous investment funds controlled by our great insurance companies." Hearings began in December 1938 and lasted until March 1940. The first session on life insurance was held on February 6, 1939. Like the Armstrong investigation three decades before, the TNEC received the full attention of the press.

One criticism leveled at the life insurance industry was that companies were not interested in investing money for "growth and development." It was charged the companies put their money mostly in bonds and securities, presumably hidden away in safe deposit boxes, where it was "doing no good." Of course, the companies were not gambling the policyholders' money in the equity market. Under the laws governing company solvency, such investments weren't permitted. (The problem of life insurance companies heavily investing in and favoring speculative ventures, it will be recalled, was a major point scored by Charles Evans Hughes in 1905.) That insurance companies charged too much for the protection and services rendered was the unspoken, underlying premise inspiring much of the investigation. Reminiscent of 1905 were the frequent questions relating to home office efficiency and distribution costs, always with the implication that the agency system of marketing life insurance was inefficient, expense and unnecessarily aggressive. Another criticism stemmed from the fact that most companies were still using the somewhat dated "American experience Table of Mortality, compiled in 1868 and based on longevity figures covering the period 1843 to 1858. Actually, the industry was studiously engaged in developing new formulae for determining the cost of insurance. However, in the days before computers, compiling and interpreting data for mortality tables was a slow and laborious process.

In the summer of 1939 the NALU had formed a committee to monitor the situation in Washington. Besides NALU president Holgar Johnson, this Special Advisory committee was composed of Charles Zimmerman, Vivian Anderson, Julian Myrick and Harry Wright. Aware of the growing concern among the agents, Johnson made the TNEC the subject of his address to the annual meeting of the Philadelphia Association, and in August published "A Statement to the Membership of the National Association Regarding the TNEC Study" in Life Association News. Among other concerns, Johnson took up their question of the future of the agency force:

One burning question that some have asked me is this: "In view of the testimony that has been sought by the committee, is an attempt being made to prove a case to eliminate the service of the agent in the future distribution of life insurance?"

In answering this question I can do no better than quote from the recorded transcript of June 12 when Mr. Davenport, the insurance specialist on the staff of the S.E.C., said, "There is a possibility that a different marketing mechanism, a different method of distributing industrial life insurance, that would be much less expensive than the present method could be devised, etc., etc."[iv]

Johnson said later that he felt it was Senator O'Mahoney who, during the course of the investigation, helped the life insurance industry most. "We needed a friend," he said, "because there were some of what we called the 'cellar boys' of the government who had their knives out ready to get the life insurance business and they were going to get us one way or another—on one basis or another."[v]

Buley comments, "Though the outbreak of war in Europe in September 1939 pushed the activities of the Temporary National Economic Committee by this time that the committee was hostile to state supervision of insurance. Holgar Johnson, president of the National Association of Life Underwriters, said that the committee was preparing the was for federal supervision and direct sale of insurance to the public by the government."[vi]

In reference to the TNEC, Zimmerman told the members of the American Life Convention in November that originally the purpose of the study was to examine whether the vast investment powers of insurance companies were being applied to the best interests of the policyholders and the general public. He pointed out, however, that the study was now dealing more with the distribution method of life insurance—specifically with the functions of the agents. Making the NALU's position clear, he said, "We are firmly of the belief that self-examination and self regulation has been and will continue to be the soundest procedure. We are firmly of the belief that supervision by the various states has been and will continue to be the most effective supervision. We are firmly of the belief that the government is best with is closest to those whom it governs. We are firmly of the belief that private enterprise is the cardinal tenet of democracy."[vii]

Sumner T. Pike, representing the Department of Commerce, presided on the morning of February 27, 1940, when the committee met in the Old Caucus Room of the Senate Office Building to hear the testimony of Charles J. Zimmerman, president of the National Association of Life Underwriters. It was the first time in its fifty-year history that the NALU received front page national attention. To the dismay of some members of the Administration, and the delight of the life insurance community, Zimmerman acquitted himself brilliantly. Shining through all his testimony was the image of the agent as concerned, responsible advisor, far removed from the quick sales artist of popular myth.

Gesell began by questioning him about the nature of his work and the kind of organization he represented. Explaining that the objects of the Association were primarily to advance public understanding of the business and improve the quality of the field force, Zimmerman quoted Article II of the NALU's constitution and bylaws and asked that this document and a booklet entitled, "Purposes of the National Association of Life Underwriters" be placed in evidence as exhibits. Throughout the morning, Zimmerman answered questions about membership and the operations of local life underwriters associations, federal inheritance taxes, the agents' role in adjusting insurance coverage, the relative merits of the various types of policies offered, how agents assisted in the liquidation of claims, the causes of agency turnover, the agent's prestige and public image, professionalism and the training level of agents, qualifications and licensing standards, and the salaries and commissions of soliciting agents, as well as the compensation of general agents. The afternoon was taken up with hearing the testimony of four insurance men with offices in the District of Columbia: Dennison David Lambert, a soliciting agent for the Travelers; insurance broker Lawrence Crawford; James Maloney, agent for Fidelity Life, and Thomas Crowley, general agent for Penn Mutual.

Many insurance executives who had previously come under the scrutinizing interrogations of Gesell found him offensive, and he was regarded as generally hostile to the insurance business. Zimmerman's experience was just the opposite. (Reading the testimony, it is hard to avoid the impression that Gesell fully sympathizes with Zimmerman's perspective, and even defers to him at moments.) Recalling years later how he came to find himself on the witness stand Zimmerman said, "There was a combination of lucky strokes. First of all, I had attended a number of the sessions, so I had a feel for what was going on. I began to realize that the investigating committee was playing off one company against the other (making the big Metropolitan the 'bad guy', for instance, and the lesser Prudential the 'good guy') I also saw that a witness who was inflexible and defensive was going to have a rough time. My third lucky break came in the person of Gerhard Gesell, the young attorney conducting the hearings."

Zimmerman explains that during a break at one of the sessions he and Gesell (through a casual conversation about the merits of Connecticut Mutual) became acquainted. They took an instant liking to one another. It was Gesell's idea to put Zimmerman on the stand to present the industry's point of view from the agent's perspective. Later, at a luncheon with Holgar Johnson who was by then head of the Institute of Life Insurance, the three discussed the line of questioning Gesell intended to pursue. Henderson also joined but when he and Johnson exchanged remarks about the outdated mortality tables, Henderson lost his temper and abruptly left.

As he warned Gesell that he would, Zimmerman dodged all questions relating to weekly premium (industrial) insurance on the grounds that he had never sold it and new nothing of that aspect of the business. "When they began to bore in on compensation," Zimmerman recalls, "I did say that I thought it a disgrace that life insurance companies which were in the forefront of selling pension plans had no retirement plans for their own field representatives. I also expressed the feeling that all companies should have service fees, as did the Acacia—the only company offering that at the time. The committee liked hearing comments like that coming from a representative of the business. Consequently, I helped diffuse some of the hostility that had developed during the course of the hearings."[viii] Undoubtedly, Zimmerman's unpretentious honesty was a chief factor in gaining credibility with the Commission. On the matter of the large turnover of agents, for instance, Zimmerman made no effort to gloss over the unpleasant truth:

Gesell—"Are we right in considering that one of the problems which is facing the agency side of the business?"

Zimmerman—"Yes. It is a serous problem."

Gesell—"What are the causes of it, Mr. Zimmerman?"

Zimmerman—"Well, there are many causes of turnover which apply, I should say, equally to all sales organizations. I speak now of the life insurance business because it is the only one with which I am familiar as regards sales. One cause of turnover undoubtedly is the lack of fitness for the business itself."

Gesell—"Do you mean a man was poorly selected originally?"

Zimmerman—"That is right. Another cause of turnover would be lack of earnings, proper earnings, which, of course, gets back to lack of fitness in many cases. In some instances, however, it gets back to the fact that the individual dislikes the business so he won't do the job adequately. He doesn't hit the ball hard enough."

Gesell—"Inability to make a living?"

Zimmerman—"Right. In some instances it gets back to the fact that the individual himself is perhaps tempermentally unsuited for sales work. He has never tried it before, and thinks he would like it and we think he would like it, but as he gets into it, we find out he doesn't like it, and is not fitted for it…."

Gesell—"Most of it gets back to the selection and the ability of the man to fit himself in the business?"

Zimmerman—"That is right. The life insurance business is not an easy sales business. As I have said, in developing the things that the agent does, it requires, I think, a high degree of—oh, perhaps not only salesmanship—but I think, a higher degree of trusteeship in many senses than in other lines of business. It requires a greater degree of imagination because we are selling an intangible. So it is not an easy business…."

Concluding his testimony, Zimmerman told the committee, "The institution of life insurance exists only because it performs a useful and necessary service to the public. Government existed for exactly the same reason. The institution of life insurance is the servant of the public. So is a democratic form of government. The institution of life insurance has exercised the highest sense of trusteeship in discharging its obligations to the public. We have the right to expect this same sense of trusteeship from our governmnt."[ix]

If the Administration's motive in setting up the TNEC was to discredit the life insurance business enough to develop a case for federal regulation, or eventual nationalization of life insurance, the committee failed in its task. For one thing, the hearings were protracted so long the public lost interest. The tedious proceedings at work in the Old Caucus Room of the Senate Office Building distinctly lacked dramatic impact in the face of the calamitous events taking place in Europe and elsewhere. Despite Henderson's crusading enthusiasm and the SEC's efforts to browbeat witnesses, along with distorted reports and innuendo on the part of pro-New Deal journalists such as syndicated columnist Drew Pearson, America's life insurance industry remained in private hands and subject to state supervision. As Buley notes:

The last challenge, that relating to the stewardship of funds held by life insurance companies—the original assignment given to the SEC and to which it finally got around in 1940—resulted in overwhelming evidence that the investments of the companies ere safe and well-handled. The faith of the people in legal reserve life insurance was unshaken by the probes. In 1939 they bought abut $12,600,000,000 of new life insurance, and in 1941 about $13,000,000,000. They believed that the life insurance companies managed by men who in general got and held their jobs on merit, were better risks than elected political officers and administrative theorists who might come and go at the whim of the electorate. Few would disagree with Senator O'Mahoney's statement made in June 1941, that the life insurance business should devote its expert knowledge and intelligence to the of making it possible for the men and women to preserve individual economic independence.[x]

In May 1956, responding to a request for a summary of Zimmerman's activities during his year in office, Pugh Moore, NALU's director of public relations, after listing his lengthy itinerary, told the former NALU president:

As president you also addressed the Life Advertisers Association at the Statler in Detroit, the American Life Convention and the Life Presidents Association, and as you know, you stopped the TNEC investigation practically dead in its tracks….In speaking to the A.L.C. you remarked that you represented 27,000 members. That was at the outset of your presidency. You will be interested to know that at the end of your presidential year the membership had increased to 32,500, or by approximately one-fifth.

Here is an interesting excerpt from your presidential report at the 1940 annual convention:

"Your president has traveled over 65,000 miles, visited more than 80 state and local association in 45 states, made over three hundred talks to insurance clubs and to the public."

In preparation for the upcoming convention in Philadelphia, Zimmerman early in 1940 asked James E. Rutherford to head the special "On to Philadelphia" Committee. (General agent for the Penn Mutual Life at Des Moines, when Madden resigned to become an executive with the Iowa Fiber Box company.) Rutherford and his committee had the satisfaction of seeing over 2,000 register at Philadelphia's Bellevue-Stratford that September.

A major event of this convention was the testimonial dinner honoring Solomon Huebner's thirty-five-year career in life insurance education. Thomas I. Parkinson, president of the Equitable, announced the establishment of the S.S. Huebner Foundation, a $125,00 scholarship fund raised by the insurance companies.[*] the NALU presented Huebner with an elaborate silver service and an after-dinner set of Spode china. Praising Huebner for his contributions to the development of business philosophy, Zimmerman said, "Through his unselfish devotion to the cause of life insurance over many years, he has commanded not only the respect but the sincere affection of the insurance field forces of this nation."

Among the eighteen past NALU presidents in attendance were a number of Huebner's old friends from the early 1900s. These included John Dolph, Charles Scovel, Earnest Clark and John Newton Russell. It was to be Russell's last convention. He died on January 19, 1941.

Most excitement centered on the guest speaker scheduled for the final luncheon, General Hugh S. "Ironpants" Johnson. Johnson was a controversial and popular figure nationally. He had served as chief administrator of the ill-fated National Recovery Administration (NRA) during its early days had been asked to resign after a period of strained relations with Roosevelt. Thereafter, he was an outspoken critic of the Administration. Not surprisingly, he was a favorite among conservative businessmen who felt that Roosevelt's policies were "ruining the country." The delegates looked forward to hearing the general's broadsides against the government and its policies, but Zimmerman and his staff suffered some moments of uneasiness, as Zimmerman relates:

General Johnson, accompanied by a pretty young lady—who I believe was named Goldie—checked in at the hotel at about 9:30 that morning. When I visited them in their suite shortly afterwards, they immediately requested a bottle of scotch, which I had sent up. As time for the luncheon approached I began wondering if the general would be in any condition to deliver any kind of speech at all.

The great ballroom of the hotel (including two tiers of balconies) was jammed with expectant conventioneers. Johnson arrived in excellent spirits and proceeded to deliver a rousing speech, replete with scathing criticisms of the government. The audience loved it and gave the general an extended standing ovation.[xi]

The nation's destiny was very much on everyone's mind in those days. More and more, events abroad were affecting political and domestic life in America. The war raging in Europe disrupted the life insurance business and commerce generally. The NALU's international efforts were also curtailed. When a Czehoslovakian, who had been receiving Life Association News since 1934, wrote explaining that he was no longer allowed to send money abroad, the editors announced:

Our Prague subscriber will continue to get his News, as the editors hope with him that "this period will soon change." Also continuing on the mailing list is the Suomi-Yhtio, Lonnrotinkatu 5, Helsinki, Finland. Other foreign subscribers who receive their copies through the censorship of a nation in or near war include two or more in Australia, England, France, Scotland, Holland, China, New Zealand, Japan, Norway and Sweden.

Life insurance representatives in over 30 foreign countries are included on the Life Association News mailing list.

Foreword by Alan Press, 1988-1989 NALU President

Preface by Jack E. Bobo, 1989 NALU Executive Vice President

Introduction

Acknowledgements

Chapter 1

Laying the Foundation—A Meeting at the Parker House

Leading Figures—Ransom, Carpenter, Blodgett and Plummer

Conditions Leading to the Foundation of the NALU

Rise of Modern Life Insurance and the General Agency System

Issues and Accomplishments of the First 15 Years

Chapter 2

In the Wake of the Armstrong Investigation

A Royal Commission Investigates Life Insurance Operations in Canada

A Period of Growth and Visibility for the NALU Under Strong Leadership

The NALU Plays a Leading Role in Insurance Education

The NALU During World War I

Chapter 3

The Post-War Decade

The NALU's Extension of Activity

The Agents Move for Recognition

Chapter 4

The Depression and Aftermath

Annual Conventions and Midyear Meetings

The NALU Celebrates Its 50th Anniversary

Chapter 5

The Agents Earn Their Wings

World War II

The NALU Joins the Industry in Legislative Battles

The NALU Establishes the National Quality Award

Chapter 6

Controversies and Schisms (1946-1956)

The Foundation of LUTC

The Nola Patterson Affair

GAMC Formally Organized

Chapter 7

The NALU Goes to Washington

Dispute Over Minimum Deposit Insurance Plans

GAMC Stages First LAMP Meeting

The NALU Celebrates Its Diamond Jubilee Year

The NALU Increases Political Activity

U.S. Senate Antitrust and Monopoly Subcommittee Investigate Life Insurance

The NALU Responds to Consumerist Activism

Chapter 8

The NALU Reaches the Century Mark

FTC Releases a Study Critical of the Insurance Industry

Formation of the Women Life Underwriters Conference

Drop in Local Membership

The NALU Issues Statements on AIDS

The NALU Combats a New Wave of Attacks

The NALU Celebrates a Century of Service

---

[*] The idea of a scholarship fund, incidentally, had come from Holgar Johnson, president of the Institution of Life Insurance. Originally, a library had been proposed but during the planning session Johnson turned to Parkinson and said, "We need teachers and scholars in the insurance business. That would be a true living monument to Huebner's work." Parkinson agreed and easily convinced the other company presidents on the committee to fund teaching fellowships rather than a library

[i] Johnson: Interview, May 1985

[ii]Zimmerman: Interview, June 1985

[iii]R. Carlyle Buley, the American Life Convention, 1906-1952: A Study in the History of Life Insurance, Appleton-Century-Crofts, New York, 1953, p. 839.

[iv] Op.cit., August 1939, p. 995.

[v] Johnson: Interview, May 1985.

[vi]Op. Cit., p. 846

[vii] LAN, December 1939, p. 376

[viii] Zimmerman: Interview, June 1985.

[ix] Verbatim Record of the Proceedngs of the Temporary National Economic committee, Vol. XII, No. 6, Washington, D.C. February 28, 1940, pp. 152ff

[x] Op. Cit., p. 863

[xi] Zimmerman: Interview June 1985.